Author: Paul How

The Supreme Court in Chile has issued a decision allowing the state bank Banco del Estado de Chile to close the account of cryptocurrency exchange Orionx on concerns over the nature of transactions being conducted on the exchange.

The ruling, reported by local news outlet Emol, reverses earlier decisions of the country’s Court of Appeals, and its anti-monopoly court, that had allowed the bank accounts of Orionx and several other plaintiffs to remain open.

According to the Supreme Court’s third division, the bank did not violate the Constitution, and that its acts did not arbitrarily curtail Orionx’s rights.

The decision stated that the assets being traded by Orionx, including ETH, XRP, LTC, and BTC, lacked physical manifestation and had “no intrinsic value,” in that they were not backed by any government or company. Rather, the digital currencies were viewed as controlled in a decentralized network of users.

The Supreme Court said that because of the nature of the assets, the bank could not comply with regulations requiring specific identities involved in transactions, which made the closure of the accounts justifiable.

The Banco del Estado de Chile was one of 10 banks that had closed accounts of cryptocurrency-related companies. Aside from Orionx, Buda and Crypto MKT had filed complaints with the anti-monopoly court of Chile. The move of banks to deny services to those in the cryptocurrency sector had been criticized as the act of a few in positions of power, who had not recognized measures put up by the companies to promote transparency and security.

Other countries’ banking sectors have shown greater openness to provide services for those using blockchain and cryptocurrencies, though not without conflict among regulators. Switzerland, where ‘Crypto Valley’ Zug is located, has had the government study how blockchain companies could be assisted in opening up bank accounts. Also, the Hypothekarbank Lenzburg has moved to accommodate such companies. However, the Swiss Financial Market Supervisory Authority (FINMA) has maintained a tough stance, requiring invested cryptocurrency assets to be covered by eight times their amount in fiat, to take into account the perceived risk associated with volatility of cryptocurrencies.

Medici Ventures, a wholly-owned subsidiary of Overstock.com, Inc., has purchased a 10% stake worth $2.5 million in Grainchain, a blockchain software provider that facilitates payments in the agricultural sector.

According to the terms of the acquisition, Medici will have the option to purchase another 10% in the company at a later date.

Grainchain said in its press release that currently, small- to medium-sized farms were behind much of agricultural output worldwide, and that these lacked the resources for more modernized and secure transactions. This is where blockchain technology is seen to help, while cutting middlemen and allowing farmers to keep more earnings.

“At the end of the day, we’re just leveling the playing field for the farmer, giving them much more power and control over the selling process,” Grainchain CEO Luis Macias said.

At present, Grainchain offers its services in the U.S. and Mexico, but said that the Medici acquisition will allow for an expansion of operations to Central and South America.

Medici President Jonathan Johnson said of the investment, “Producers operate on razor-thin margins and are up against a host of factors far beyond their control… GrainChain helps to support those producers by simplifying and securing the measuring and payment process and bringing unprecedented transparency to the industry.”

Grainchain was founded in 2013, and uses a three-part blockchain-based system to eliminate error and fraud in the process of delivering goods to end-users. According to the company, smart contracts are used between buyers and sellers, and Internet of Things (IoT) devices measure both weight and quality of grains at each step of the way. According to its website, the company has facilitated about 84,000 transactions with over 1,400 active participants, and has overseen the processing of nearly 5.3 billion pounds of various commodities.

While Overstock is most known as a retailer, it has also invested in blockchain through subsidiary Medici, which also holds a stake in VinX, a company that tracks wine futures through blockchain. It has been estimated that about 20% of wine worldwide is labeled fraudulently, which makes blockchain a potential alternative to present tracking systems for wine.

Overstock has also invested in tZero, a new exchange specifically for the selling of tokens.

The South Korean government is looking at imposing a tax on cryptocurrencies, and regulation for initial coin offerings (ICOs).

The Korea Times reported that Finance minister nominee Hong Nam-ki, during his confirmation hearing, had issued a prepared statement enumerating the taxation plan, which will take into account practices elsewhere in the world.

Hong said, “A task force consisting of experts from relevant government agencies including the National Tax Service and the private sector will be formed to examine overseas examples and hammer out the taxation plan.” Currently, according to him, there was “no internationally agreed regulatory framework” for cryptocurrencies, which he called “a new phenomenon.”

He also expressed concerns of “such lingering problems as the market overheating and investor protection. Therefore, we need to be careful in building the regulatory framework.”

Hong said that ICOs, which were prohibited in the country in September 2017, will be considered for regulation instead, with other markets to be monitored before a decision is made.

“We will determine our policy orientations on ICOs with relevant agencies after reviewing the results of the financial regulator’s market survey and getting feedback from experts,” Hong said. The survey had local blockchain companies providing their input on the matter.

Hong had made similar statements in support of allowing ICOs, as chief of the Office for Government Policy Coordination. The country’s National Assembly is also recommending the lifting of the ban, after which regulations could be legislated.

Cryptocurrency exchanges in the country have enjoyed preferential tax rates, being classified like venture companies, but the government indicated last October that higher rates were coming for such firms.

Hong said, “We will do our utmost to nurture blockchain technology as nine out of the 10 business types classified as blockchain-related businesses by Statistics Korea excluding the crypto exchanges can be still acknowledged as venture companies.”

The exchanges, however, have recently benefited from the government’s clarification that banks need not worry of legal issues when dealing with cryptocurrency-related businesses, as long as the usual anti-money laundering/know-your customer (AML/KYC) requirements were met.

South Korea is a member of the G20 forum, that recently issued a joint declaration calling for regulation of cryptocurrencies in line with standards of the Financial Action Task Force (FATF), of which the country is also a member.

The Bangkok Post said that the test VAT payments are being done in the department’s innovation laboratory. If successfully implemented for actual government operations, the country would become the first to be able to probe tax cases via distributed ledger technology.

Department Director-General Ekniti Nitithanprapas had first announced the initiative last month, which he said would make the agency’s investigations more efficient and accurate, with immutable data on the blockchain having to reconcile with each other. Specifically, the department wants to avoid issuing VAT refunds based on erroneously submitted or fabricated data.

Aside from blockchain, the department is exploring the use of machine learning and artificial intelligence (AI) so as to better detect fraudulent practices, which Ekniti said would encourage more people to properly declare taxes.

Among other blockchain-related initiatives of the Thai government is the creation of a wholesale Central Bank Digital Currency (CBDC), running on the R3 Corda platform, and overseen by the Bank of Thailand (BoT), the country’s central bank. Issuance of the digital government currency would be to “enhance efficiency of the Thai financial market infrastructure.”

Another BoT project is the use of blockchain for selling scripless government savings bonds.

As part of the Thai government’s growing awareness of blockchain in the economy, it has moved for better oversight to prevent fraud, with the issuance of a royal decree last May requiring cryptocurrency-related companies to register with local authorities.

In connection with this, the Thai Securities and Exchange Commission recently advised investors to not trade with the Q cryptocurrency exchange, due to its lack of a license as a “digital business operator.”

Blockchain has been used elsewhere for other government processes, specifically, elections. It was announced last week that South Korea’s National Election Commission was collaborating with the country’s Ministry of Science and ICT in testing out a blockchain-powered surveying system that could eventually be used to count votes nationwide.

Similar systems have been implemented in the South Korean province of Gyeonggi-do and the Japanese city of Tsukuba, which have been able to hold referendums on local community programs. The U.S. states Maine and West Virginia have also seen proposals for blockchain-powered elections.

Members of the G20 international forum have signed a joint declaration that establishes, among other things, the adoption of regulations for cryptocurrencies, in line with standards set forth by the Financial Action Task Force (FATF).

Various media outlets reported that the statement was signed at the conclusion of G20 talks during the weekend, in which concerns such as climate change, sustainable development, gender equality, and movement of refugees were also addressed.

Part of the document read, “An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth… We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed.”

Related to this, the G20 nations also committed to “continue to work together to seek a consensus based solution to address the impacts of the digitalization of the economy on the international tax system with an update in 2019 and a final report by 2020.”

The FATF consists of 37 member nations. Last October it had set the requiring of its standards to be applied in jurisdictions by June of next year. Under these regulations, cryptocurrency-related entities such as wallet providers, cryptocurrency exchanges, and those holding initial coin offerings (ICOs) will be required to conduct customer due diligence, which includes monitoring and reporting of transactions deemed suspicious.

Countries that fail to meet such standards, as determined by the task force’s periodic reviews, risk being placed in its blacklist.

The G20 includes the European Union (EU) and 19 countries, most of which are represented in the FATF as well, including Argentina, Australia, Japan, the UK, and the U.S.

Reacting to G20’s latest declaration, Bobby Lee, co-founder of the BTCC exchange, tweeted that “national governments are slowly but surely losing their monopoly and ability to issue fiat money.”

I wonder if @G20org World Leaders actually realize that they DO face a REAL Common Enemy now?

In connection with pronouncements and actions by the FATF and G20, individual countries such as Japan and Thailand, as well as individual U.S. states, are already pursuing their own financial reforms taking into account cryptocurrency markets and blockchain technology.

Cryptocurrency merchant bank Galaxy Digital Holdings reported a loss of $76.65 million for the third quarter, as it was weighed down by persistently low digital asset prices over the past year.

“The current quarter loss was largely a result of realized loss on digital assets, unrealized loss on investments, an impairment loss on goodwill and equity based compensation accruals,” the latest report read.

For the first nine months of the year, the company’s losses amounted to $175.68 million.

Galaxy Digital, formed on November 30 last year, has cryptocurrency investments primarily in BTC and ETH, whose prices are down 54.6% and 82.1% respectively since January 9. Adding to difficulties was increased competition in the trading business, which has led to narrower spreads for arbitrage activity, according to the company.

“While we continue to improve and strengthen our trading business, lack of overall trading volume in cryptocurrencies has been a headwind for the business,” the report read.

The trading segment was responsible for $47.47 million of the third-quarter loss. Over the first nine months of 2018, trading losses amounted to $150.74 million.

Total net realized loss on digital assets for the quarter was $38.1 million, with $22.1 million of this coming from ETH, $9.7 million from BTC, and $2.6 million from Ripple. These losses were partially offset by $1.9 million worth of gains from Ethereum Classic.

The previous quarters had smaller net realized losses, partly because of gains from short selling, of $33 million and $21.9 million in the first and second quarters, respectively.

Total assets as of September 30 were $435.50 million, compared to $54.75 million as of December 31, 2017. Total liabilities, on the other hand, were at $48.99 million as of September 30, lower than the $151.40 million as of June 30 and the $53 million as of December 31 of last year.

Galaxy Digital CEO Mike Novogratz, in a Bloomberg interview, expressed optimism that the cryptocurrency market will be picking up soon, saying that come next year, “Q1, Q2, if the institutions start coming in, [cryptocurrencies] will put in new highs.”

The report pointed to increase use of cryptocurrencies and blockchain in recent months, including with Fidelity Investments, which launched its digital assets company last October. Such advances, the company said, “lead to wider adoption of blockchain and cryptocurrencies. This adoption should lead to increased volumes and prices, which should benefit all of our businesses.”

With many cryptocurrency prices down, now is a time to look for underpriced assets in the sector. Calvin Ayre recently said that Bitcoin SV, maintaining the original vision of Bitcoin as a global digital ledger, is “seriously undervalued now, and the token best positioned to grow in value.”

On Day 1 of CoinGeek Week, the BCH Boys sat down with the Tokenized team, who have made tokenization on the Bitcoin chain a reality. Discussed are the possibilities for practical application of blockchain technology, and of Bitcoin specifically, as envisioned by Satoshi Nakamoto. It isn’t enough to talk of smart contracts and tokens; more important is focusing in how these tools could provide utility, in terms of cost, without depending on any specific economic player.

The Tokenized team provides their perspective on what makes Bitcoin SV “pure Bitcoin,” and how stability of protocol is necessary for the technology to be of benefit to communities. Watch their interview with the BCH Boys below.

South Korea’s Ministry of Science and ICT, and the National Election Commission (NEC), have announced plans for setting up a voting system powered by blockchain.

If results are successful, the system will be considered for online elections, according to the NEC.

Although online voting has been utilized in the country—the first time in 2013—use among citizens has been limited, to about 5.64 million people in all due to security concerns. The country has a little over 50 million people, of which 42.5 million are registered voters, with an average turnout of 64.3%.

ZDNet said that the government expected blockchain to aid with voter authentication and result saving, where the added transparency and security would allay fears of fraud and hacking. The results of elections, where votes are to be inputted by mobile devices and personal computers, will be viewable as the data is included in the blockchain.

The initial trials will begin in December, with surveys conducted by Seoul National University’s Blockchain Society and the Korea Internet & Security Agency. The NEC said that aside from blockchain, it was also looking at applying artificial intelligence (AI), big data, and Internet of Things (IoT) to the voting system.

The use of blockchain for polling in South Korea is not altogether new. Last year, the province of Gyeonggi-do used Blocko’s Coinstack platform to decide on the approval of 527 community projects. This involved the votes of 9,000 residents.

In Japan, the city of Tsukuba has made use of blockchain for choices on local “social contribution programs.” Although there were reports of some difficulties for some voters, the test was declared a success.

Zug, the ‘Crypto Valley’ of Switzerland, has conducted municipal voting via blockchain, though this involved only 72 citizens. The city government intends to expand the use of blockchain, to be part of its digital ID system.

In the U.S., there have been several initiatives involving distributed ledger technology for voting. In West Virginia, its first use has been limited to allowing overseas members of the military to vote, with a mobile app. In Maine, proposals have been considered for use of blockchain in municipal elections.

The chairman of the U.S. Securities and Exchange Commission (SEC) said he would like to see the cryptocurrency markets adopting similar tools overseeing the trade of traditional instruments, before being “comfortable” with allowing exchange-traded funds (ETFs) based on cryptocurrency price movements.

CNBC reported that SEC Chairman Jay Clayton, speaking at the Consensus Invest Conference in Manhattan, pointed to several aspects of the cryptocurrency industry he wanted improved. Among these was a monitoring of prices to ensure the absence of manipulation, similar to surveillance mechanisms for stock exchanges.

“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade,” he claimed.

Last April, Nasdaq announced that the Winklevoss-owned Gemini exchange would be using the stock exchange company’s SMARTS market surveillance technology for its BTC futures contracts traded on Cboe’s futures exchange. Even this did not prevent the SEC from denying Gemini’s application for an ETF based on BTC futures, last July.

Clayton also said that custody for cryptocurrencies has not been sufficiently developed, with numerous high-profile thefts reported often. “We’ve seen some thefts around digital assets that make you scratch your head… We care that the assets underlying that ETF have good custody, and that they’re not going to disappear,” he said.

Currently, several companies offer custody services, with regulatory approval, such as BitGo. However, Clayton maintained that services “need to be improved and hardened.”

During the conference, Clayton also affirmed the SEC’s position on initial coin offerings (ICOs), whose tokens the agency classifies as securities under its control. He addressed companies holding ICOs to “start with the assumption that you’re starting with a securities offering.”

The SEC has not decided on the ETF application of VanEck Solidx, which it had said it would do by September 30. It has likewise refrained from a final ruling on other applications.

The lone dissenter to the commission’s rejecting of Gemini’s application, Commissioner Hester Peirce, has remained outspoken on the need for the SEC to step aside and allow for the innovation of financial products, subject to the same regulations as other investments. At the Crypto Valley summit in Zug, Switzerland, she delivered a video speech stating that she was “working on convincing my colleagues” to favor an approach allowing well-informed investors to choose whether or not to buy a cryptocurrency-based product.

She also noted how the Commodity Futures Trading Commission has been open to cryptocurrency derivatives, and that the SEC itself was holding various events regarding digital asset technologies, which made her “hopeful.”

The Cagayan Economic Zone Authority (CEZA) in the Philippines has reported a revenue of PHP521 million ($9.9 million) from January to September 2018, a 132% increase from the corresponding period last year.

Much of the improved performance, according to CEZA CEO Raul Lambino, has to do with the government-owned and -controlled corporation promoting the economic zone as a hub for cryptocurrency, blockchain, and other financial technology.

“The idea of setting up the first cryptocurrency and blockchain technology center in the country has paid off handsomely… Financial technology is proving to be the new high tech of the future,” Lambino said, according to local outlet Business Mirror.

For 2017, CEZA had reported a net loss of PHP65 million ($1.2 million), after reducing the presence of online gaming firms in the area as part of efforts to curb illegal operations. Further reforms saw the revocation of registration of 164 business process outsourcing (BPO) firms providing services to offshore gaming operators, last December.

In spite of such changes, CEZA has managed to keep investments coming, and even paid PHP83.3 million ($1.6 million) in taxes to the national government for the first three quarters of 2018. As of October, the government-owned firm has issued its Financial Technology Solutions and Offshore Virtual Currency (FTSOVC) and Offshore Virtual Currency (OVC) licenses to a total of 19 companies, out of a maximum of 25 licenses to be issued.

Even with such encouraging numbers, Lambino stated that he wasn’t going to rely solely on fintech to keep up revenues, also welcoming investments in the industrial and tourism sectors. “Growth in the economic zone will be investment-driven. CEZA will diversify,” he said.

CEZA announced last week a crackdown on cryptocurrency firms operating without licenses. Lambino acted on reports of illegal cockfighting going on, which go against the firm’s moves to curb illegal gambling. He has tapped the National Bureau of Investigation (NBI) and the Philippine National Police (PNP) to carry out the crackdown, according to The Manila Times.

Among CEZA’s plans for the economic zone is the putting up of a Blockchain University intended to create a highly skilled work force for the industry. CEZA has also partnered with the Shanghai Jucheng Supply Chain Management Group for construction of a $100-million seaside resort in the area. In addition, CEZA has procured the services of Eminova Asset Management Ltd. and Hunan Goke Maglev Technology Development Ltd. to create a facility for manufacturing magnetic levitation trains in the province.